Its no secret that coming up with the 20% needed to qualify for a conventional mortgage in the United States is difficult for a first time homebuyer — especially as home values have exploded since 2020. You can still qualify without the 20%, but then you’ll be required to pay private mortgage insurance (“PMI”) on top of the mortgage itself. This additional cash out the door every month serves no benefit to you whatsoever and does not reduce your loan balance — its like paying a higher interest rate, and is great to avoid if possible.
When faced with a “make an offer today or the property will be gone to a competing bid” situation in my 20s, I didn’t have anywhere near the $68,000 cash that I’d need to qualify for a down payment on a conventional mortgage. What I did have, though, was about $20,000 in cash and… my 401(k) that I’d been faithfully contributing the maximum to since I started working at age 22.